Export Restrictions on ZTE Raise China’s Ire

Over the weekend, news arose that Chinese OEM ZTE had been slapped with some heavy restrictions on goods sent to them from the United States. To put a long story short, allegations are that suppliers in the U.S. were sending ZTE components and supplies, which ended up making their way to Iran. Since the U.S. has a policy of not exporting tech goods to Iran, the allegations were not taken lightly and restrictions were placed, essentially blocking ZTE from receiving U.S. goods. Suppliers would have to apply for a license in order to export to ZTE, but according to a notice from the U.S. commerce department, those licenses will most likely end up being denied. Obviously, this puts a bit of pain on both ZTE’s operations and their relations with the U.S. and China, unsurprisingly, isn’t happy.

China maintains close trade relations with the Middle East, including Iran. This action against ZTE has caused trading of their stocks in Hong Kong and Shenzen to come to a screeching halt following the official announcement. Although ZTE can appeal the ruling starting today, it is set to go into effect on Tuesday. With ZTE being a major player in the Chinese OEM scene, having them take such an economic blow was not taken lightly by the Chinese government. China’s Foreign Ministry Spokesperson, Hong Lei, went so far as to say, “we hope the US stops this erroneous action and avoids damaging Sino-US trade cooperation and bilateral relations.”

U.S. firms that ship supplies and other goods to ZTE include big names like Qualcomm, Intel and Microsoft. These firms will have a hard time getting goods to ZTE with this restriction, if they’re able to at all. For their mobile business, this essentially means that ZTE is unable to use the Qualcomm’s Snapdragon or Intel Atom processors that are popular in mobile devices, if stocks of such items dry up before this decision is reversed, that is. The three biggest players they may be able to get silicon from at this point are Samsung, Huawei and MediaTek, although it’s not guaranteed that the former two would be willing to share their in-house chips. It’s likely that this will soon be reversed, but how this plays out over the coming weeks will be interesting to watch.